In plain English
What Pip means
Pips make rate movements easier to state than long decimals. For EUR/USD, a move from 1.08420 to 1.08430 is one pip. For USD/JPY, a move from 156.20 to 156.21 is one pip under the usual convention. Pip value in money depends on the pair, position size, account currency, and exchange rate used for conversion.
Why it matters
Pips are used to express spreads, price changes, stop distances, and profit or loss. They should not be confused with a fixed dollar amount. The same 10-pip move can have a different cash value for a standard lot and a micro lot, and may require currency conversion for an account held in another currency.
Example
A trader buys 10,000 EUR/USD at 1.08430 and later sells at 1.08510. The change is 0.00080, or 8 pips. Simplified before spread, commission, and conversion effects, the gain is 8 × 10,000 = US$8 because the quote currency is U.S. dollars.
Quick answers
Common questions
Is one pip always worth US$10?+
No. About US$10 per pip is a common simplified figure for a 100,000-unit EUR/USD position when the account is in U.S. dollars. Pip value changes with position size, pair convention, and currency conversion.
How many decimal places is a pip?+
For many non-yen pairs, a pip is the fourth decimal place, or 0.0001. For commonly quoted yen pairs, it is generally the second decimal place, or 0.01.
Sources